Washington’s big business agenda is on life support

It may be too early to issue a death certificate to the big business agenda in this Congress. But suffice it to say, its vitals are faint and fading. And its condition took a turn toward critical on Friday evening, when House Republican leadership suffered their latest stunning humiliation.

For those who didn’t spend their Friday rush hour glued to C-SPAN, a recap: the House GOP’s far-right flank revolted against a plan by Speaker John Boehner (R-Ohio) to fund the Department of Homeland Security, nearly prompting a shutdown of the anti-terrorism agency. Boehner and his team managed to salvage a last-minute extension, buying leaders another week, but the source of the conservative fringe’s angst remains. That group insists on bundling the department’s funding up with measures that would gut President Obama’s post-election executive order easing deportations of illegal immigrants. Yet the strategy faces a dead-end in a still closely divided Senate, a fact that newly-installed Majority Leader Mitch McConnell (R-Ky.) has spent the last several weeks demonstrating by putting it to a series of votes, only to have Democrats block it each time. Unfortunately for Boehner, his rump faction maintains a surprisingly durable immunity to observable reality. And so the Speaker’s stuck, caught between the imperative to avoid another disastrous (partial) government shutdown and a faction that won’t accept anything less than its own maximalist terms.

How — and whether — this gets resolved this week remain uncertain propositions. But this much is already clear: If Congressional Republicans have this much trouble fulfilling their most basic charge of keeping the government up and running, the corporate lobby shouldn’t hold its breath for complex trade agreements and fundamental overhauls of the tax and immigration codes. Corporate chiefs know this. It’s why the Business Roundtable — the group representing top CEOs in Washington, whose inability to re-center the debate is the subject of a Fortune story in the current issue — has dramatically narrowed its focus to what it calls the four key pillars of growth. And first among equals on that wish list is a return to rational budgeting.

“That was priority number one,” AT&T CEO Randall Stephenson, now one year into a two-year term as the Roundtable’s chairman, told Fortune last month. “If you can at least get some period of time with some stability and regular order in Congress and the administration, then you can begin to tackle issues that really drive economic growth.”

Indeed, Republican leaders built a guarantee they’d clear that admittedly low bar into their fundraising pitches to the business class during the 2014 midterm campaign. Boehner, McConnell and their allies talked up the need to assemble a “governing majority,” buzzwords for margins large and pliant enough to allow them to work their business-friendly will. The GOP’s midterm rout delivered the numbers, giving Boehner the biggest Republican majority in the House since the 1930s while handing McConnell the keys to the Senate. And upon taking power, McConnell made explicit that Republicans would seek to build on the humble ambition, first, not to be “scary.”

Mere weeks later, any grander plans appear to have collapsed along with that one in the dust cloud of Friday’s spectacle. After all, House Republicans just showed they can’t process their own acid reflux over Obama’s immigration order without nearly shuttering a critical federal agency. So the likelihood that group will manage to craft a messy, comprehensive legislative solution to the issue and then rally around it is vanishing, at best. Ditto for tax reform. Even before the meltdown, Senate Finance Chairman Orrin Hatch (R-Utah) acknowledged the tax code rewrite he’s charged with guiding through the upper chamber is likely to take longer than two years.

That leaves trade as the last remaining hope for near-term progress on the corporate agenda. And there, again, the Friday debacle spells bad news. The business lobby is ramping up a campaign to convince lawmakers to hand Obama fast-track negotiating authority on trade deals, a piece of leverage free-traders view as key to finalizing work on the massive Pacific Rim pact known as the Trans Pacific Partnership and another with European countries. But 52 House Republicans — fifty-two, 5-2 — just proved their willingness to shame their own leaders in order to register antipathy for Obama’s use of executive authority. So how willing will the same crowd be to voluntarily hand the president a longer leash to hammer out deals with foreign governments? They won’t do it simply because the business elite make the request.

Fresh evidence of that came over the weekend, when a parade of GOP presidential prospects appearing at the right-wing Club for Growth’s winter conference all called for dismantling the Export-Import Bank. That once-sleepy federal agency, long a sidelight in the broader trade debate, has taken on outsize significance as a litmus test for Republican free-market purity; at the confab, even the Republican field’s most prominent moderate, former Florida Gov. Jeb Bush, added his support to winding down the institution. No wonder, then, that lobbyists closely tracking the trade debate in Congress say they’ll need to round up significant numbers of House Democrats to carry the issue, with varying ranges that average out around 30. And they say that so far, the allied anti-trade forces of labor and environmental groups are winning the early argument back home by raising a ruckus in the districts of fence-sitting Democrats. That fight has yet to start in earnest, but considering the atmosphere, it’s already hanging by a thread.

With his Snidely Whiplash mustache and his heavy jowls, Don Blankenship has always looked the part of the villainous coal tycoon. Now he may get the chance to play that role in federal prison. The former Massey Energy CEO, for decades one of the most powerful men in West Virginia, was indicted last week on four counts related to the Upper Big Branch coal mine explosion, which killed 29 miners in April 2010. He will be arraigned later this week.

Through two government and two independent investigations since the disaster, Blankenship has denied all charges and scoffed at the notion that he might be held criminally responsible, even though two of his former subordinates have pled guilty and been sentenced to prison. Blankenship “conspired to commit and cause routine, willful violations of mandatory federal mine safety and health standards” at the mine, the indictment charges, “in order to produce more coal, avoid the costs of following safety laws, and make more money.” He is also charged with lying to the SEC and to Massey investors in the months after the accident.

Blankenship resigned from Massey in late 2010, weeks before the company was sold to Alpha Resources. His trial promises to provide more evidence of the unsafe practices of the coal industry in Appalachia, and, perhaps, to bring a measure of consolation to the families of the mend who died at Upper Big Branch. More than that, it represents the first time the chief executive of a major coal company has faced criminal charges for safety violations committed at his mine.

Less than a century ago, in the so called “Coal Wars,” federal troops were called out to quell unrest among miners protesting, often violently, against unsafe and unhealthy conditions in the coal mines. Now a coal CEO faces more than 30 years in prison for allegedly perpetuating, and attempting to conceal, those conditions.

*****

The mansion that Blankenship used to entertain his corporate friends sits on a ridge overlooking Williamson, W.Va. You can see its turrets and porticoes from the mostly vacant downtown of Williamson, which, like many coal towns in the region, has been devastated by the steep decline of the Appalachian coal industry. When I visited Williamson in September 2013, while reporting for my forthcoming book on the future of the coal industry, a local activist and organizer named Eric Mathis showed me the community garden that he and others have created to try and revive the town’s moribund economy.

A graduate of Appalachian State, Mathis began working in economic development after being recruited to assist in a class action lawsuit against Blankenship and his company, Massey Energy. The suit was over water disposal practices at Massey’s mines—practices that also come up in the federal indictment.

“They started dumping slurry into underground mines, pulling out the particulates and putting them in there,” says Mathis. “It was just a toxic soup that they dumped into the drinking water in Mingo County. They’d warned Blankenship it was happening and he didn’t give a shit. At the same time he built a pipeline to his house, knowing all his neighbors were drinking poison, to ensure that he had clean water. That’s who he is.”

That lawsuit was filed in 2006, just as the regional coal industry was arriving at the edge of the precipice off which it has since plunged. Attitudes toward Massey and its combative CEO were mixed—and feelings about the industry remain that way. On the one hand, many people across Appalachia deplore the way the companies have despoiled the land through drastic mining techniques—particularly mountaintop removal—and resent the callous attitudes of company officials toward miners’ health and safety. On the other, a lot of families depend on paychecks from the coal mines, and resent any policies that might limit the industry’s prospects.

The recent re-election campaign of Sen. Mitch McConnell, the Kentucky Republican, was essentially a contest to see who could support coal more fervently: McConnell or his opponent, Alison Lundergan Grimes. After five terms in Washington, McConnell can hardly boast of passionate support back home in Kentucky. But Grimes could never quite convince the voters she was truly a Friend of Coal. This past Friday, McConnell said in an interview that President Obama’s treatment of the coal industry was an “outrage,” and vowed to fight back. “So he had a war on coal and, honestly, I’m going to go to war with him over coal,” said McConnell.

Blankenship himself is an Appalachian by birth and by outlook. Born in Stopover, Ky., he grew up in Delorme, a village on the Tug River, West Virginia’s southwest border with Kentucky. A graduate of Marshall University, he got his start as an office manager for Rawl Sales & Processing, a Massey subsidiary, and rose through the ranks, becoming CEO in 2000. In a state where coal tycoons are accorded near-royal status, Blankenship managed to alienate many through his fierce anti-union stands and his arrogant dismissals of safety regulations. And he has been accused over the years of buying influence with officials, particularly state Supreme Court justices, with possible oversight of the coal industry.

In testimony during a lawsuit over fatalities at Massey’s Aracoma mine, in 2008, Blankenship responded when accused on the stand of being indifferent to the safety of his miners: “It is just the opposite,” Blankenship said, as quoted on Bloomberg News. “As an accountant, I know that safety is an important cost control. So even if I were so calloused, which I am not, as to believe that safety should be sacrificed for production, I would understand that it doesn’t make any sense because the accidents and so forth cause you to have more costs.”

The current indictment contains many such instances of plain speaking. Officials at mine entrances had code words to warn miners underground of the arrival of mine inspectors, and routinely covered up safety violations, per orders from Blankenship. Blankenship often berated his managers, in writing, pushing them to avoid spending on safety measures and keep up production. “Please be reminded that your core job is to make money. To do this, you have to run coal at a low cost, ship your orders, and control your quality,” reads one such missive. In another message he told managers to ignore proper ventilation requirements for underground shafts where miners were working: “We’ll worry about ventilation or other issues at another time. Now is not the time.”

“You have a kid to feed,” Blankenship told one employee, referred to in the indictment as “the Known UBB [Upper Big Branch] Executive,” in a blistering handwritten memo on March 10, 2009 – a year before the disaster. “Do your job.”

Three days later came another handwritten note: “Pitiful. You need to get focused. … I could Krushchev you. Do you understand?”

*****

In retirement, Blankenship spends his time trumpeting his free market, anti-environmental, climate-change-denial views on his web site, titled “American Competitionist,” and in emails to his followers. I’m on his mailing list. He uses the website and email blasts to rant against the forces he believes are destroying America: the EPA, the Mine Safety & Health Administration, and climate-change scientists. He cordially turned down my request for an interview for the book. After the indictment was handed down on Nov. 13, he was characteristically defiant: “Don Blankenship has been a tireless advocate for mine safety,” the lawyer, William W. Taylor III, said in a statement. “His outspoken criticism of powerful bureaucrats has earned this indictment. He will not yield to their effort to silence him.”

This time, however, it’s not powerful bureaucrats who have accused Blankenship: it’s a federal grand jury of ordinary citizens in Charleston, W.Va., in the heart of coal country. Reactions from the families of the miners killed at Upper Big Branch, from politicians, and from executives at Alpha Resources has been swift and sharp. In the justice system, said Sen. Jay Rockefeller of West Virginia, in a statement, Blankenship “will be treated far fairer and with more dignity than he ever treated the miners he employed. And frankly,” Rockefeller added, “it’s far more than he deserves.”

Blankenship is an outlier within the coal industry, which has brought modern technology and enhanced safety practices to the mines over the last 10 years. Even underground mining is an anachronism today, when strip mines and “mountaintop removal” are more common and more profitable. But for an industry in decline, the sight of a former powerful executive being hauled into court over his company’s mining operations is chilling. Lawyers for coal mining companies across the country are at this moment combing old memos and emails for incriminating evidence.

Blankenship’s first day in court will be a hearing in Beckley, W.Va., on Nov. 20.

Mitch McConnell’s Secret Weapon: His Wife

This post is in partnership with Time. The article below was originally published at Time.com

By Jay Newton-Small, TIME

The weekend before the midterm election, Senate Minority Leader Mitch McConnell and his wife, former Labor Secretary Elaine Chao, campaigned at a restaurant in Montgomery County, east of Lexington. Chao introduced McConnell to the packed house, but after the event was done McConnell sat down to grab a late lunch with a staffer. A woman and her two daughters approached the leader and asked for a photograph. His aide said, “Sure thing, can you just wait until the leader is finished eating?”

“Sure,” replied the women, who then continued to stand, staring at the leader as he ate.

Chao then sat down and she motioned for the woman and her daughters to join her at the other end of the table. And for 10 minutes, Chao engaged the family. “Are you two sisters?” she asked. They shyly nodded.

“I grew up with a lot of sisters, too. There’s nothing better than girl power,” she said, regaling the girls with stories of her five younger sisters and her family, who arrived in the U.S. from Taiwan on a freight ship in 1961, when Chao was eight, fleeing the communist revolution on mainland China. By the end of her stories, the girls were beaming and giggling.

McConnell, 72, was never one for retail campaigning. Childhood polio left him tender and averse to backslapping. To avoid it on the campaign trail, he’ll often grip a person with his left hand on the upper arm, holding them away from him, as he shakes their hand with his right. He’s also hard of hearing, which means in loud rooms he often misses what people say. But on the campaign trail, Chao, 61, makes up for her husband’s shortcomings.

Over the past two years, Chao headlined fifty of her own events and attended hundreds more with and on behalf of McConnell. She also raised “a huge part” of McConnell’s $30 million war chest, says John Ashbrook a spokesman for McConnell. But, perhaps most importantly, she was the campaign hugger.

Dr. Noelle Hunter said she’s formed a “special bond” with Chao over the past year, after McConnell worked to recover Hunter’s eight-year-old daughter, Luna, from Mali, when she was taken there by Hunter’s ex-husband. The political science professor, who was the subject of one of McConnell’s most memorable campaign commercials, was a former Democrat until she met the McConnells at a parade in Paintsville last year in August. “I went to shake her hand and she just grabbed me and held me gave me a mom-type hug,” Hunter said. “She said, ‘We are praying for you to get Luna home.’ She was so warm and gentle. I’d never met her before. I had no idea she even knew about my situation. And it meant the world to me that clearly these two people were talking about Luna over the dinner table.”

Chao is also the one who keeps tabs on various political allies across Kentucky. “She very actively listens. She really pays attention and remembers details about people,” says Kelly Westwood, head of the Kenton County women’s Republican group. “She doesn’t see them for months and then says, ‘I know you sprained your arm, how’s it going?’ Or, ‘How’s you bid for city council going?’ She remembers everything.”

It is perhaps Chao’s personal touch that helped McConnell offset his opponent, Alison Lundergan Grimes’ attacks on him as anti-women. Chao starred in several ads on McConnell’s behalf talking about his record on women’s issues. In the end, McConnell beat Grimes 56% to 41%. “The biggest asset I have by far is the only Kentucky woman who served in a president’s cabinet, my wife, Elaine Chao,” McConnell said at the annual Fancy Farm GOP political picnic in August.

Soon after that event, Kathy Groob, the founder of a Democratic PAC, Elect Women, mocked Chao’s heritage on Twitter. “She’s not from KY… She is Asian and [President George W.] Bush openly touted that,” Groob said. Groob also referred to Chao as McConnell’s “Chinese wife,” and said McConnell is “wedded to free trade in China.”

Perhaps the only thing that really angers McConnell is when Chao is attacked. This has happened before, in 1996, when surrogates for his opponent that year (Democrat Steve Beshear, who is now governor of Kentucky) started saying, “It’s time to elect an All-American family to represent Kentucky.”

“It was a racial slur in my view and it infuriated the Senator,” says Billy Piper, a longtime former McConnell aide, who remains close with the leader. “He is not ever going to take it when she gets attacked.”

Chao is proud of her family’s history. Not only did they struggle against communism in a very personal way, but her father came to the U.S. with nothing and built a multi-million dollar shipping business.

And that legacy of hard work rubbed off on Chao, who wanted to give back to the country that gave her family so much. She graduated from Mount Holyoke and Harvard Business School before becoming a White House fellow in the Reagan Administration. She served as deputy Transportation Secretary under George H. W. Bush and director of the Peace Corps. In the Clinton era, Chao was named the head of the United Way before becoming Secretary of Labor for all eight years under George W. Bush.

McConnell, who married Chao in 1993, often quips: “People remark that I’m in a mixed marriage. I don’t see it that way. In my first marriage, I married a Liberal. Now that was a mixed marriage. With Elaine, she and I understand one another.”

Republicans can’t repeal Obamacare, but they’ll pretend to try

Maybe Mitch McConnell and John Boehner have decided on a good cop/bad cop routine.

A day after McConnell, the incoming Senate Majority Leader, told reporters in Louisville, Kentucky that the midterm voters sent a message to the parties to work together, Boehner, the House Speaker, offered a more aggressive interpretation. “My job is to listen to the American people,” the Ohio Republican told reporters gathered Thursday in the Capitol for his first post-election press conference. “The American people have made it clear they’re not for Obamacare. Ask all those Democrats who lost their elections Tuesday night.”

Exit polls revealed a dour electorate, with 78 percent worried about the direction of the economy and 70 percent reporting their own financial situation is the same or worse than it was two years ago. It should be no surprise, then, that they ranked the economy their top concern, 20 points ahead of health care. On President Obama’s signature law itself, they were divided, with 46 percent saying it was about right or didn’t go far enough and 49 percent declaring it an overreach. Another election night poll found nearly six in ten voters said their vote was not intended to send a message about the law.

Then there’s the matter of who actually voted. One estimate is pegging turnout at 37 percent of eligible voters, the lowest participation rate since 1942. Not exactly a ringing endorsement for either side.

Distilling the will of a fragmented, partial electorate is tricky work and there may be no right answer. But there are certainly some wrong answers, and Boehner struck on one. He knows it. This is the same guy who declared the measure “the law of the land” in the days after the 2012 election. But he leads a Republican majority that owes its margin to lawmakers bent, Sisyphus-like, on continuing to push wholesale repeal, no matter the practical impossibility of achieving it as long as a Democrat sits in the Oval Office and the GOP lacks the numbers in Congress to override a veto.

And that’s what’s really going on here: McConnell and Boehner are each doing a balancing act. The divergent natures of their chambers dictate different approaches to the same problem. In the House, where a bare majority rules, Boehner’s firmer grip on his gavel will license a more strident tack — and the continued strength of his right flank will demand it. McConnell will still need to peel off a handful of Democratic votes to move most business, hence the more conciliatory tone. But the longer-run political imperative is the same for both: They need to pivot as quickly as possible to items that can actually get signed into law, so that they have something to show the restive, angry electorate when they face them again in two years. Those likely include changes to Obamacare — there is broad, bipartisan support for repealing the medical device tax, for example. The most serious threat to the law looms at the Supreme Court, which agreed Friday to hear a challenge to the federal subsidies that help make the new insurance coverage affordable.

Meanwhile, McConnell and Boehner will need to make a show of trying to rip the law out “root and branch,” as the incoming Senate leader liked to say on the Kentucky campaign trail. For help staging the repeal kabuki, they might want to study the recent history of the opposition.

Democratic leaders faced their own version of the same conundrum when they retook control of both the House and Senate in the 2006 midterms. After twelve years in the minority, they rode back to power in part by harnessing liberal disgust with the Iraq war. That election sent a clearer message than this one, with exit polls at the time revealing 56 percent of voters disapproved of the war and 55 percent favored withdrawing some or all of the troops. And yet, with a 51-seat majority in the Senate, Democrats had little hope of forcing the hand of President Bush, who was resolute about prosecuting his surge strategy.

“We had to follow through and try to force action despite the fact that it was difficult to imagine getting the votes,” says Jim Manley, at the time an aide to Senate Majority Leader Harry Reid (D-Nev.). “It’s a release valve.”

Democrats tried to force a timeline for troop withdrawals onto funding for the Iraq war. Bush repeatedly pledged to veto it. At the end of their first year in power, with lawmakers anxious to quit the capital for Christmas, Democrats folded and approved the war money with no strings attached. Liberals fumed — “this was the time of MoveOn,” says Manley — and Democratic approval ratings dropped to 32 percent, below Bush’s own marks. Congressional Democrats turned on each other, directing recriminations at their colleagues in the other chamber. But by then, the squabbling in the Capitol was already being drowned out by a presidential contest rumbling into gear. The four Democratic Senators angling for their party’s nomination — Obama and Hillary Clinton, included — didn’t even bother coming back to Washington to cast votes. And less than a year later, Democrats rode Obama’s movement candidacy to major gains in both the House and Senate.

Will the Republican victory lift stocks?

Republicans scored a big victory in Tuesday’s election by retaking control of the Senate. But was it also victory for investors?

Analysts say Wall Street is too complex to reduce to a simple yes or no based on the results of an election. History provides a similarly cloudy picture.

Republicans, as a party, are considered to be more Wall Street-friendly than their counterparts across the aisle. But a GOP victory had been expected for some time, meaning the election results are likely already priced into stocks.

John Canally, chief economics strategist at LPL Financial, predicted that U.S. markets will make a strong post-election finish in 2014. But his optimism isn’t exactly something new because he had expected continued gains in stocks well before Tuesday’s election results.

The stock market generally rises in the fourth quarter, and that is especially true following a mid-term election, according to Canally. He noted that the market rose in 88% of fourth-quarters in mid-term election years since 1950, regardless of which political party was in power.

Even before the voters cast their ballots this week, the market looked primed for a strong fourth quarter, Canally said. A number of high-profile companies reported strong results in recent weeks. The U.S. economy has also been strong with gross domestic product rising at an annual rate of 3.5% in the most recent quarter, fueling optimism about the rest of the year and beyond.

Still, Canally noted that investors had expected a Republican win and, as a result, some more business-friendly legislation like immigration reform and approval of the Keystone XL pipeline. Canally does not expect major corporate tax reform to hit anytime soon, though.

He expects the technology and industrial sectors to be the strongest going forward, but investors could also be “warming up” to energy stocks with the expectation that a Republican-led Congress would likely pass policies that benefit the energy industry. In fact, energy companies are already among those to get a lift from Tuesday’s election results, as their shares jumped Wednesday after a mostly bad year because of falling oil prices.

The healthcare sector should also remain strong heading into next year, Canally added. The fact that Republicans did not win enough seats to beat a filibuster means that they will likely be unable to repeal Obamacare, a thorn in the side of conservatives but a friend to the healthcare sector.

For the record, both the Dow Jones Industrial Average and the S&P 500 closed at record highs on Tuesday. Nasdaq dipped slightly, but remains near its highest levels of the past 14 years.

History suggests that the market will have continued success through April. The six month period starting in November tends to be the strongest period for stocks, particularly following a midterm election. Over the past 70 years, the S&P 500 has averaged a 15.3% gain during the six months that followed a mid-term election, according to S&P Capital IQ.

Another historical detail to consider is how the market performs with a Democrat in the White House and a Republican majority in Congress. The answer: That lineup has provided the S&P 500 with its best performances, according to Standard & Poor’s Equity Research.

Canally says that finding likely draws from a relatively small sample size with a number of variables (the last time this was the case, for instance, Bill Clinton was in office during a tech boom). But he does feel that having two parties in power in Washington, D.C. can also create an environment in which politicians are forced to work together, creating more bipartisan policy.

Looking ahead, a lot of the market’s success depends on at least some new market-friendly policies getting passed, which means bipartisan support will be needed. Senate Majority Leader frontrunner Mitch McConnell has expressed an eagerness to work with Democrats to pass new legislations, while President Obama said Wednesday that the White House was also amenable to working with the Republican-led Congress.

But, if McConnell and Speaker of the House John Boehner face any leadership challenges from the more conservative side of the Republican party, that could get in the way of bipartisan policy. “If it’s the current leadership of the GOP, I think that’s more market-friendly, because they’re more willing to work with the president,” Canally says.

On the other hand, if the two parties are unwilling to work together, the markets may dip. He gave the example of another standoff over raising the federal debt ceiling, which Canally says the “markets clearly do not want to see again.”

Republicans humiliated Obama, now they need to humble themselves

Republicans just handed President Obama an unequivocal humiliation, routing his party in midterm contests spanning the map. As a result, they now find themselves on dangerous ground.

The narrative of the GOP’s outsize rout is fast drying in cement. So the question turns to the newly-empowered party’s mandate: Do they have one? If so, for what?

The GOP establishment brains responsible for engineering the party’s gains already are urging humility. Their mantra today: “This is not a mandate, it’s an opportunity.” Congressional Republican leadership hewed to the message as the scale of their victory became clear last night. House Speaker John Boehner, in a statement, said Republicans are “humbled by the responsibility” and will skip celebrating in favor of getting to work. Senate Republican leader Mitch McConnell, who romped over his own challenge back home in Kentucky from a young, energetic Democrat, struck a peacemaking note in his victory speech: “We do have an obligation to work together on issues where we agree,” he said. “Just because we have a two-party system doesn’t mean we have to be in perpetual conflict.”

That might sound bizarre from a figure widely understood to be the architect of Republicans’ programmatic opposition to Obama. But the numbers behind the GOP gains tell part of the story: Voter interest in the election was the lowest of the last six midterms; those who did show up registered equally dismal feelings about Obama and Republican leaders, with nearly 6 in 10 describing themselves as dissatisfied or angry with both; and broadly, Republicans actually rated below Democrats in voter approval, with 40% reporting a positive view of the GOP, compared to 44% for the president’s party.

The numbers on Capitol Hill tell the rest of the tale. Yes, Boehner expanded his grip on the House to at least 242 seats, on track to piling up the largest Republican majority in that chamber since the Truman administration — a margin that should make Boehner’s job easier. But the real action for the next two years was always going to be in the Senate, where the 60-vote threshold for accomplishing most of anything will force McConnell to go hunting for Democratic votes. He’ll need even more — 67 — to overcome a veto pen Obama has so far only wielded twice in his presidency but will likely use more frequently in the remainder of his second term. Given those hurdles, the difference between a 51-seat majority and a 53 or 54-seat one seems almost academic.

And so the duty for Republicans becomes two-fold: Managing expectations about what they’re able to get done given the real checks that remain on their power, and then actually delivering some accomplishments to show they’re equal to the responsibility of governing. The strategists and moneymen who coauthored the Republican victory are already working to communicate that message to the victors.

“It’s first and foremost a rebuke to President Obama and his policies, but it’s also a reality check and a second chance for Republicans,” says Steven Law, a former McConnell aide now running American Crossroads, the Karl Rove-affiliated super PAC that spent nearly $22 million helping elect Republicans. And Law, notably, is counseling caution. “Republicans need to keep in mind this election wasn’t primarily about them… The voters are going to expect Republicans to put good, practical solutions on the president’s desk.”

That means no more debt-ceiling brinkmanship when the country faces the next deadline to lift its borrowing authority in March. And, relatedly, no more pressing a dead-end bid for a wholesale repeal of Obama’s health care law. On the contrary, there is a list of business-friendly, smaller-bore agenda items Republicans can dust off in hopes of striking compromises with the White House — on trade deals, energy projects, and patent reform. Sen. Ted Cruz (R-Texas), captain of last year’s disastrous government shutdown gambit, missed or ignored that memo in the run up to Election Day, insisting he’d press his party to double down on confrontation. By Tuesday night, he looked like a churlish caucus of one when he appeared on CNN and refused to say whether he’d support McConnell’s ascension to majority leader (just moments after the current titleholder, Nevada Democrat Harry Reid, placed a call to McConnell, conceding).

But if Cruz is dealing himself out of the work of governing, it only highlights McConnell’s burden. After all, the Kentucky Republican now stands poised to realize his career ambition of leading the Senate after flawlessly executing a long game built on denying Obama any Republican cooperation. The strategy both stoked and was reinforced by the Tea Party uprising on the right — a movement that ended up turning on the party, complicating McConnell’s project of capturing Senate control. This year, McConnell’s path to victory required him to stamp out the last of the rebellion’s brushfires and then train the focus back on the President. In both cases, it meant defining Republicans according to what they aren’t. The work of finally filling in those blanks awaits, and it will not be easy.

“I think the wind is at our back,” Kentucky Republican Sen. Rand Paul said Sunday on CNN’s State of the Union. “I think people are ready for new leadership.”

A fresh batch of surveys from local polls had plenty of good news for the GOP. In Iowa’s hard-fought Senate race, a Des Moines Register survey released over the weekend showed Republican Joni Ernst opening up a seven-point lead over Democratic Rep. Bruce Braley. And NBC/Marist polls showed Republican candidates beating their Democratic opponents in Kentucky, Georgia and Louisiana.

After back-to-back election cycles, in which Republicans blew their shot at the Senate majority by losing winnable races behind flawed candidates, GOP operatives smelled victory. A top party official called Senate Minority Leader Mitch McConnell on Saturday to tell him he’ll soon be Majority Leader, the New York Timesreports. Republicans are widely expected to expand their majority in the House.

Still, many races remain within the margin of error, and both parties are preparing for the possibility that control of the Senate might not be decided for weeks if the races in Georgia and Louisiana head to run-offs. Vice President Joe Biden said predictions of Democrats losing the Senate will prove wrong.

McConnell: Whistling past his Obamacare evasions

Fact checkers giveth and fact checkers taketh away. Mitch McConnell — poised to fulfill his career ambition of rising to Senate Majority Leader if he can survive his own reelection back home in Kentucky, both increasingly likely prospects — demonstrated as much this week in his only debate with the Democrat trying to oust him.

The cable-news catnip out of the event was the continued refusal of McConnell’s challenger, Kentucky Secretary of State Alison Lundergan Grimes, to say whom she voted for in the 2012 election. It was a craven dodge explained by her need to quarantine her bid from contamination by President Obama, a politically lethal toxin in the Bluegrass State.

Grimes made sure the character questions flowed in the other direction, too. Amid lively exchanges on issues of real relevance to voters — the minimum wage, health care reform, the future of the coal industry — she did her best to cast McConnell as an out-of-touch plutocrat. The barbs had McConnell calling in the refs, pointing out that the Washington Post‘s Fact Checker blog had challenged two of Grimes’ overextended claims about him.

But the gotcha game is dangerous. On Thursday, the selfsame Fact Checker trained its attention on the debate and called out McConnell for what it termed a “slick and misleading” statement of his own on the new health care law.

Indeed, McConnell’s answer was a master class in dissembling, a series of individually accurate sentences that still managed to be much less than the sum of their parts. Essentially, the senator was seeking to square his steadfast advocacy for ripping out the Affordable Care Act “root and branch,” with the fact that in Kentucky, where Democratic Gov. Steve Beshear has emerged as one of the law’s most outspoken champions, it has extended health coverage to some 500,000 people and is widely judged a giant win for the state.

Clawing insurance access back from such a significant chunk of the population, most of whom got covered under the law’s expansion of Medicaid, is not an attractive position. So McConnell suggested Kentucky could keep what it had established even if the federal law were to be repealed. What he didn’t — and doesn’t — say is how. And the answer is hardly simple, considering the state health exchange (called Kynect, Beshear’s shrewd Obamacare rebranding) relies on the feds — for industry regulations, the individual mandate, and most significantly, the initial funding for the Medicaid expansion. Said McConnell in the debate: “And with regard to the Medicaid expansion,that’s a state decision. The states can decide whether to expand Medicaid or not. In our state, the governor decided to expand Medicaid.”

McConnell sounded a different note when I asked him about this back in December. We were in Pikeville, in the impoverished eastern reach of the state, and the senator had just wrapped up his 58th “hospital town hall” event, a series that saw him crisscrossing Kentucky to warn healthcare providers of the chaos in store as the law took force. At the time, Kentucky represented a bright spot for an otherwise-troubled Obamacare. Tens of thousands were coming forward to take advantage of the new, subsidized benefits, even as the disastrous rollout of healthcare.gov continued to dominate the national conversation. Kentucky provided a fascinating theater for the law’s implementation: a ruby-red warren of deep Obama antipathy nevertheless embracing his signature law over the objections of its own senior senator.

And McConnell wasn’t just another Republican opponent. As Fortune reported, in the Senate, he was chief architect of the campaign to sink it, moving in November of 2008 — two months before President Obama was inaugurated — to begin organizing the Senate Republican strategy for facing down the President. I asked McConnell how he would propose covering those now receiving healthcare access for the first time if Congress repealed the law and started from scratch. “This is going to leave 30 million uninsured,” he said, referring to a Congressional Budget Office report that estimated that number nationally would remain without coverage despite the law, “and you can debate a Medicaid expansion on another day. I personally don’t think this state or this government, with a $17 trillion debt, can afford a Medicaid expansion.” I asked again: How do you get that segment of the population covered then? “They’re not going to be covered anyway,” McConnell replied.

In the moment, and since then, I understood him to mean that those who’d lose the coverage they’d recently received would just have to fend for themselves, as they had before Obamacare.

In the wake of the Fact Checker’s critique, I ran my December exchange by McConnell spokesman Don Stewart. He heard it differently, and I think he’s right: McConnell was referring to the 30 million the CBO projected would remain uninsured, not those newly covered under the law. But the question stands: What would McConnell propose as a replacement? And the answer, finally, is that there is no answer. “He’s said to replace Obamacare would require a step-by-step approach,” Stewart says, “developed in a cooperative way with Members in the committee-led process.”

McConnell can get away with this in part because Grimes has been unwilling to make the issue central in the campaign. She’s been mealy-mouthed about the law, including refusing to say whether she would have voted for it — surely a more consequential evasion than the one over her 2012 presidential choice. The other reason is that the repeal talk itself, from McConnell and other Republicans, is less than serious. But if he ascends to Majority Leader, McConnell will face pressure from his right flank to rally his own ranks around significant changes to the law. As McConnell wraps up his campaign — his sixth appeal to represent his home state, his first to lead the U.S. Senate — Kentucky voters deserve a clearer sense of where he’s headed.

The Tea Party has fallen. Now what?

FORTUNE — Tactically, the Republican establishment is routing the Tea Party. The insurgency’s backslide has been apparent all year, as its handpicked challengers to GOP incumbents failed to gain traction, groups representing it in Washington overreached, and the deficit concerns stoking its base waned. But yesterday, the “backslide” slid right back off a cliff. Tea Party-backed candidates in three key primary races suffered decisive losses in Kentucky, Georgia, and Idaho.

With the handwriting on the wall, deep-pocketed conservative sponsors huddled last Thursday and stewed over how to force the GOP to double down on hard-right policy positions. Those include opposition to a big immigration deal, same-sex marriage, and abortion rights — issues toxic to the imperative of broadening the party’s demographic coalition. But the movement’s electoral drubbing suggests its grip on the Republican agenda may finally be breaking.

The question is what will replace it. Senate Minority Leader Mitch McConnell, one of the big victors in yesterday’s contests, was explicit with Fortune earlier this year that Senate Republicans will not unify behind a governing vision before the November midterms. And even if a more moderate brand of Republicanism is ascendant, the term itself remains relative — and murky.

Consider that Thom Tillis, the establishment’s man in the North Carolina Senate primary, led the ultraconservative state House and as recently as 2011 talked about the need to “divide and conquer” those on public assistance. Or conversely that Ben Sasse, who delivered a rare victory for Tea Party groups in the Nebraska Senate primary by affecting an anti-establishment pose, was hardly an outsider, having gone to Harvard and served in George W. Bush’s administration.

Amidst this identity crisis, Republicans across the ideological spectrum are clamoring to lay claim to the legacy of a figure they are lately elevating to mythic status: Jack Kemp, the former Congressman and vice presidential candidate who died in 2009. It makes sense. As an animating force behind Ronald Reagan’s supply-side economic program, Kemp’s Reaganite credentials were ironclad. But he was also perhaps the last major GOP figure who invested in preaching compassion for the working poor while reaching out to minority constituencies not accustomed to hearing from Republicans. For Kemp, that outreach was a natural extension of his efforts on the field as an all-star NFL quarterback leading integrated teams. His would-be political heirs are having a somewhat toughertime repeating the trick.

In truth, Kemp reveled in his iconoclasm and would likely fare poorly in a conservative purity test today. His call for swift action to aid struggling homeowners during the mortgage crisis, for example, put him at odds with the new right’s founding cri de coeur. And he was a passionate advocate of immigration reform. No matter. Sasse in his victory speech quoted Kemp: “We may not get every vote, but we’ll speak to every heart.” And Sasse’s aides in a memo said the candidate will model himself after Kemp in office, following the late pol’s record of providing “real ideas and real solutions to real problems” — a subtle but unmistakable dig at the just-say-no style that’s come to characterize Texas Senator Ted Cruz and like-minded GOP reactionaries. Sasse was only the latest in a growing number of Republicans looking to borrow some legitimacy by association with Kemp.

So in a fitting counterpoint to last Thursday’s meeting of conservative backers, the Jack Kemp Foundation convened a small group of thinkers on Friday to chart some new policy priorities. While the right-wing meeting had taken place at the Ritz-Carlton in Tyson’s Corner, just outside Washington, the Kemp group met at Lincoln’s Cottage — the 16th president’s summer home — perched on a hill three miles north of the White House. These days, the Greek revival mini-mansion stands hidden on the grounds of a retirement home for veterans in the midst of a working-class neighborhood, a spare and largely forgotten Lincoln memorial in a city full of them.

Most of the Kemp conference unfolded in the Emancipation Room, the bedroom where Lincoln crafted the document that freed the slaves, securing a moral birthright for his fledgling party in the process. That may sound like a portentous place for a clutch of boldfaced names from the conservative establishment — Bill Kristol, Fred Barnes, Peggy Noonan, Amity Shlaes, etc. — to mull how to bind up the GOP’s wounds. But the issue of the party’s internal division somehow never came up directly. Instead, much of the morning was given over to familiar bellyaching about the wages of Obama’s foreign-policy fecklessness on American prestige abroad.

Only late in the afternoon did a participant spell out in stark terms the challenge facing the party. “People don’t think conservatives care,” Arthur Brooks, president of the American Enterprise Institute, told a dwindling crowd. “They think conservatives don’t care about the poor … You can’t win if people think you won’t be remotely sympathetic to people like them.”

While more aggressive institutions to its right have stumbled embracing dead-end extremism, AEI of late has been reasserting itself as a voice of right-leaning reasonableness, which should make it an interesting place to watch if the GOP establishment’s revival proves durable. What Brooks was offering Friday, for the most part, was advice on framing. “The biggest reason that people, particularly people who are poor, think that Republicans, conservatives, don’t care about people like them is because they talk as if they don’t,” he said.

Yet Brooks also suggested that to pull off a new sales pitch, Republicans first have to buy it themselves. “Jack Kemp — you know what his magic was? He loved people. He believed in them,” Brooks said. “People who are not working would much prefer to have their children see them earning a paycheck as opposed to getting a welfare check. That’s the truth. And if you believe the best about people and give them opportunity, if you give them hope, they will respond largely in a very constructive way. But if you assume the worst about them, then they will assume that you are hostile, they will assume you are racist, they’ll assume you don’t care about people like them, and to a certain extent they won’t be wrong.”

Republican maneuverings between now and Election Day will amount to getting the game pieces in place. Where the balance of power in the party will truly reside and what that means for the fate of the Republican renovation remain questions for a later day.